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Pre-Feasibility Study Prime Ministers Small Business Loan Scheme

(Sub Contract Workshop Facility)

Small and Medium Enterprises Development Authority Ministry of Industries & Production
Government of Pakistan
www.smeda.org.pk
HEAD OFFICE
4th Floor, Building No. 3, Aiwan e Iqbal, Egerton Road, Lahore Tel 92 42 111 111 456, Fax 92 42 36304926-7 helpdesk@smeda.org.pk REGIONAL OFFICE PUNJAB 3rd Floor, Building No. 3, Aiwan e Iqbal, Egerton Road Lahore, Tel: (042) 111-111-456 Fax: (042)6304926-7 helpdesk.punjab@smeda.org.pk REGIONAL OFFICE SINDH 5TH Floor, Bahria Complex II, M.T. Khan Road, Karachi. Tel: (021) 111-111-456 Fax: (021) 5610572 helpdesk-khi@smeda.org.pk REGIONAL OFFICE KPK Ground Floor State Life Building The Mall, Peshawar. Tel: (091) 9213046-47 Fax: (091) 286908 helpdesk-pew@smeda.org.pk REGIONAL OFFICE BALOCHISTAN Bungalow No. 15-A Chaman Housing Scheme Airport Road, Quetta. Tel: (081) 831623, 831702 Fax: (081) 831922 helpdesk-qta@smeda.org.pk

September 2013

Pre-Feasibility Study

Sub Contract Workshop Facility

Table of Contents
1 DISCLAIMER .......................................................................................................................................... 2 2 PURPOSE OF THE DOCUMENT ......................................................................................................... 3 3 INTRODUCTION TO SMEDA .............................................................................................................. 3 4 INTRODUCTION TO SCHEME ........................................................................................................... 4 5 EXECUTIVE SUMMARY ...................................................................................................................... 4 6 CRITICAL FACTORS ............................................................................................................................ 4 7 BRIEF DESCRIPTION OF PROJECT & PRODUCT ........................................................................ 5 8 INSTALLED & OPERATIONAL CAPACITIES ................................................................................. 5 9 GEOGRAPHICAL POTENTIAL FOR INVESTMENT ..................................................................... 5 10 POTENTIAL TARGET MARKETS / CITIES ..................................................................................... 5 11 PROJECT COST SUMMARY ............................................................................................................... 6 11.1 11.2 11.3 11.4 11.5 11.6 11.7 11.8 11.9 PROJECT ECONOMICS ............................................................................................................ 6 PROJECT FINANCING ............................................................................................................. 6 PROJECT COST ......................................................................................................................... 7 SPACE REQUIREMENT ........................................................................................................... 7 MACHINERY AND EQUIPMENT............................................................................................ 8 FURNITURE & OFFICE EQUIPMENT .................................................................................... 8 RAW MATERIAL REQUIREMENTS ....................................................................................... 8 HUMAN RESOURCE REQUIREMENT ................................................................................... 9 REVENUE GENERATION ........................................................................................................ 9

12 ANNEXURE ........................................................................................................................................... 10 12.1 12.2 12.3 INCOME STATEMENT ...................................................................................................................10 STATEMENT OF CASH FLOW........................................................................................................11 BALANCE SHEET .........................................................................................................................12

13 USEFUL PROJECT MANAGEMENT TIPS ...................................................................................... 13 14 USEFUL LINKS ..................................................................................................................................... 14 15 OPERATING AND FINANCIAL ASSUMPTIONS ........................................................................... 15

Pre-Feasibility Study

Sub Contract Workshop Facility

DISCLAIMER

This information memorandum is to introduce the subject matter and provide a general idea and information on the said matter. Although, the material included in this document is based on data/information gathered from various reliable sources; however, it is based upon certain assumptions which may differ from case to case. The information has been provided on as is where is basis without any warranties or assertions as to the correctness or soundness thereof. Although, due care and diligence has been taken to compile this document, the contained information may vary due to any change in any of the concerned factors, and the actual results may differ substantially from the presented information. SMEDA, its employees or agents do not assume any liability for any financial or other loss resulting from this memorandum in consequence of undertaking this activity. The contained information does not preclude any further professional advice. The prospective user of this memorandum is encouraged to carry out additional diligence and gather any information which is necessary for making an informed decision, including taking professional advice from a qualified consultant/technical expert before taking any decision to act upon the information. For more information on services offered by SMEDA, please contact our website: www.smeda.org.pk

Pre-Feasibility Study

Sub Contract Workshop Facility

PURPOSE OF THE DOCUMENT

The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs in project identification for investment. The project pre-feasibility may form the basis of an important investment decision and in order to serve this objective, the document/study covers various aspects of project concept development, start-up, and production, marketing, finance and business management. The purpose of this document is to facilitate potential investors in Subcontractor workshop by providing them with a general understanding of the business with the intention of supporting potential investors in crucial investment decisions. The need to come up with pre-feasibility reports for undocumented or minimally documented sectors attains greater imminence as the research that precedes such reports reveal certain thumb rules; best practices developed by existing enterprises by trial and error, and certain industrial norms that become a guiding source regarding various aspects of business set-up and its successful management. Apart from carefully studying the whole document one must consider critical aspects provided later on, which form basis of any Investment Decision. 3 INTRODUCTION TO SMEDA

The Small and Medium Enterprises Development Authority (SMEDA) was established in October 1998 with an objective to provide fresh impetus to the economy through development of Small and Medium Enterprises (SMEs). With a mission "to assist in employment generation and value addition to the national income, through development of the SME sector, by helping increase the number, scale and competitiveness of SMEs" , SMEDA has carried out sectoral research to identify policy, access to finance, business development services, strategic initiatives and institutional collaboration and networking initiatives. Preparation and dissemination of prefeasibility studies in key areas of investment has been a successful hallmark of SME facilitation by SMEDA. Concurrent to the prefeasibility studies, a broad spectrum of business development services is also offered to the SMEs by SMEDA. These services include identification of experts and consultants and delivery of need based capacity building programs of different types in addition to business guidance through help desk services.

Pre-Feasibility Study

Sub Contract Workshop Facility

INTRODUCTION TO SCHEME

Prime Ministers Small Business Loans Scheme, for young entrepreneurs, with an allocated budget of Rs. 5.0 Billion for the year 2013-14, is designed to provide subsidised financing at 8% mark-up per annum for one hundred thousand (100,000) beneficiaries, through designated financial institutions, initially through National Bank of Pakistan (NBP) and First Women Bank Ltd. (FWBL). Small business loans with tenure upto 7 years, and a debt : equity of 90 : 10 will be disbursed to SME beneficiaries across Pakistan, covering; Punjab, Sindh, Khyber Pakhtunkhwah, Balochistan, Gilgit Baltistan, Azad Jammu & Kashmir and Federally Administered Tribal Areas (FATA). 5 EXECUTIVE SUMMARY

This particular pre-feasibility is for setting up a Sub-contract Workshop Facility in any industrial cluster of any major city of Pakistan. Sub contracting workshop comes in the segment of light engineering sector. The workshop is proposed to cater to machine or work on parts for electrical home appliances, pumps, and other engineering products. Most of the subcontracting workshops are part of small and medium scale industry and are operating in cities like Peshawar, Lahore, Gujranwala, Faisalabad, Karachi etc, as a service provider. The workshop is proposed to operate 8 hours daily. The maximum jobs for the project are assumed to be 30,000 per year. The business will provide employment opportunity to 3 individuals including the owner manager. The total project cost for setting up this workshop is estimated at Rs. 1.59 million out of which Rs 1.11 million is capital cost and Rs 0.48 million as working capital. The project is financed through 90% debt and 10% equity. The project NPV is around Rs. 1.54 million, with an IRR of 37% and payback period of 3.36 years. The legal status of this project is proposed as Sole Proprietorship. 6 CRITICAL FACTORS

Following are the factors critical for success of this business venture; Technical knowhow and relevant experience of entrepreneur. Availability of skilled labour having technical knowledge. Ability to generate work orders through industrial networking, direct marketing and negotiating long term contracts. Utilization of job costing and job card with technical specifications sheet.

Pre-Feasibility Study

Sub Contract Workshop Facility

BRIEF DESCRIPTION OF PROJECT & PRODUCT

The project is for establishing a Sub Contract Workshop Facility. The sub contracting workshop will not manufacture its own products instead it will provide the job work facilities to the light engineering sector. This practice is prevalent in the majority of such workshops. The workshop will provide services to businesses such as manufacturers of electrical home appliances, pumps, textile sector, machinery repair shops, auto part makers, etc. This business activity is more suitable for an entrepreneur with mechanical technology background. The prospective entrepreneurs are also recommended to have previous workshop floor experience. Major capital investment is in the procurement and installation of lathe, shaper and cylindrical grinding machines. The workshop will provide machining facility for engineering products such as washing machines, electric motor rotor shafts. A variety of machining services can be carried out on the machinery set proposed under this project, however, for the purpose of calculating cost and revenues electric motor shaft L18 x D has been taken as a standard item. The workshop will require services of two machinists and one helper to carry out requisite job orders. The business will be setup in rented premises having covered area of 400 sqft. 8 INSTALLED & OPERATIONAL CAPACITIES

The installed capacity of the project is to perform 30,000 jobs per year. During the first year it will operate at 70% capacity and perform 21,000 jobs. The total human resource strength will be 3 including the entrepreneur/owner. The workshop will operate for 8 hours daily. 9 GEOGRAPHICAL POTENTIAL FOR INVESTMENT

The subcontracting workshop clusters are mostly operating near industrial areas of Lahore, Faisalabad, Karachi and Gujranwala. The ideal location for the project may be outside municipal and cantonment limits, preferably in a small industrial cluster/estate. Other options could be near an industrial complex like large fertilizer, oil or power units off major highway. 10 POTENTIAL TARGET MARKETS / CITIES The potential target markets could be the local home appliances manufacturing, and electrical pumps manufacturers. The suitable cities for marketing can be Gujranwala, Gujrat, Lahore, Faisalabad Karachi, Peshawar, Gilgit and Quetta.

Pre-Feasibility Study

Sub Contract Workshop Facility

11 PROJECT COST SUMMARY A detailed financial model has been developed to analyze the commercial viability of Sub Contract Workshop Facility under the Prime Ministers Small Business Loan Scheme. Various cost and revenue related assumptions along with results of the analysis are outlined in this section. The projected Income Statement, Cash Flow Statement and Balance Sheet are attached as appendix. 11.1 PROJECT ECONOMICS All the figures in this financial model have been calculated for the job work processing of 30,000 washing machine motor rotor shafts per year. During the first year of operations the facility will be working at 70% of its installed capacity. The following table shows internal rates of return and payback period;
Table 1: Project Economics

Description Internal Rate of Return (IRR) Payback Period (yrs) Net Present Value (NPV)

Details 37% 3.36 1,537,733

Returns on the scheme and its profitability are dependent on getting regular work orders from the local industry and strict compliance to the technical specifications of the finished products. 11.2 PROJECT FINANCING Following table provides details of the equity required and variables related to bank loan;
Table 2: Project Financing

Description Total Equity (10%) Bank Loan (90%.) Markup to the Borrower (%age/annum) Tenure of the Loan (Years)

Details Rs.159,688 Rs.1,437,188 8% 7

Pre-Feasibility Study

Sub Contract Workshop Facility

11.3 PROJECT COST Following fixed and working capital requirements have been identified for operations of the proposed business. Additionally, rented premise has been recommended due to ease of availability and lower costs.
Table 3: Capital Investment for the Project

Capital Investment Machinery Furniture & Office equipment Total Capital Costs Initial Working Capital Total Project Cost 11.4 SPACE REQUIREMENT

Amount (Rs.) 1,035,000 77,500 1,325,900 484,376 1,596,876

The workshop area has been calculated on the basis of space requirement for placement of machinery and holding incoming and outgoing jobs. However, normal workshops in the industry do not follow any set pattern or space standards. Following table shows calculations for project space requirement.
Table 4: Space Requirement

Space Requirement Workshop area Total Area

Sqft 400 400

Premises will be obtained on rent @ Rs 15,000 per month having the required building structure along with 3 phase electricity connection.

Pre-Feasibility Study

Sub Contract Workshop Facility

11.5 MACHINERY AND EQUIPMENT Following table provides list of machinery and equipment required for a typical sub contract workshop facility;
Table 5: Machinery and Equipment

Description Lathe Machine 5 (used) Shaper 8 stroke (used) Center grinding machine 3 (used) Pedestal grinding machine chuck Tool grinder Welding plant 100A Total

Quantity 1 1 1 1 1 1 6

Cost Rs/unit 300,000 200,000 450,000 25,000 20,000 40,000

Total Rs. 300,000 200,000 450,000 15,000 10,000 40,000 1,035,000

The workshop will take work orders for parts having cylindrical profiles, mostly the rotor shafts of electrical motors and pumps. Lathe machine will be used to bring the shaft to desired diameters, center grinding machine for fine machining and shaper machine to cut notches, etc. Other equipment will be used to support the main machines for finishing or facilitating work. 11.6 FURNITURE & OFFICE EQUIPMENT Following furniture and office equipment full fills the basic requirements, for this operation;
Table 6: Furniture & Office Equipment Costs

Description Chairs Stools Table Steel cupboard Metal working table Measuring instruments set Telephone Total

Quantity 3 4 1 2 1 1 1

Cost 4,000 2,500 5,000 12,000 15,000 10,000 1,500

Amount 12,000 10,000 5,000 24,000 15,000 10,000 1,500 77,500

11.7 RAW MATERIAL REQUIREMENTS Significant amount of raw materials is not required. Since the job work involves metal forming operations, cost of tooling along with jigs and fixtures have been incorporated.
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Sub Contract Workshop Facility

Table 7: Cost of Material

Description Tooling Misc (jigs, fixtures, etc) Cost per Unit

Unit Number Number

Rate 10.00 6.80

Qty 1 1

Rs./Unit 10.00 6.80 16.80

11.8 HUMAN RESOURCE REQUIREMENT


Table 8: Human Resource Requirement

Description Owner Manager Machinist Helper Total Staff

No. of Employees 1 1 1 3

Salary per month 20,000 15,000 10,000

The table above provides details of human resource required to run such a business. The owner must be a trained machinist preferably with vocational/technical education in mechanical technology. He will communicate with light engineering industries for order taking, operate the machines and take care of payments/receipts matters. A machinist will be hired to perform the work of operating the machines along with the owner. On an average the workshop can process 100 washing machine motor rotor shafts in a day. It is also capable of processing other similar jobs like motor bush, fan rotor shaft, pump shaft, etc. 11.9 REVENUE GENERATION
Table 9: Revenue Generation

Product

Unit

Sales First Year Price Production (Rs./Unit)

Washing machine motor rotor shaft Total Sales Revenue

No.

Rs 80

First Year Sales Revenue (Rs) 21,000 1,680,000 1,680,000

Pre-Feasibility Study

Sub Contract Workshop Facility

12 ANNEXURE 12.1 Income Statement


Income Statement
Year 1 Revenue Cost of goods sold Gross Profit General administration & selling expenses Administration expense Rental expense Utilities expense Travelling & Comm. expense (phone, fax, etc.) Office expenses (stationary, etc.) Promotional expense Depreciation expense Subtotal Operating Income Earnings Before Interest & Taxes Interest expense Earnings Before Tax Tax NET PROFIT/(LOSS) AFTER TAX Balance brought forward Total profit available for appropriation Balance carried forward 1,680,000 790,792 889,208 Year 2 1,927,200 894,954 1,032,246 Year 3 2,207,040 1,012,433 1,194,607 Year 4 2,523,576 1,144,916 1,378,660 Year 5 2,881,349 1,294,304 1,587,045 Year 6 3,285,440 1,462,742 1,822,699 Year 7 3,741,537 1,652,649 2,088,888 Year 8 4,255,998 1,866,754 2,389,244 Year 9 4,835,936 2,108,138 2,727,798 Rs. in actuals Year 10 5,376,121 2,345,472 3,030,648

240,000 180,000 18,148 42,000 2,400 16,800 111,400 610,748 278,460 278,460 109,207 169,253 169,253

263,367 198,000 19,963 39,861 2,634 19,272 111,400 654,496 377,750 377,750 95,961 281,789 281,789 169,253 451,042 451,042

289,008 217,800 21,959 45,586 2,890 22,070 111,400 710,714 483,893 483,893 81,615 402,278 228 402,050 451,042 853,092 853,092

317,147 239,580 24,155 52,057 3,171 25,236 111,400 772,746 605,914 605,914 66,079 539,835 13,984 525,852 853,092 1,378,944 1,378,944

348,025 263,538 26,570 59,367 3,480 28,813 111,400 841,194 745,851 746,451 49,252 697,199 29,720 667,479 1,378,944 2,046,422 2,046,422

381,909 289,892 29,227 67,618 3,819 32,854 111,483 916,803 905,896 905,896 31,030 874,866 53,730 821,136 2,046,422 2,867,559 2,867,559

419,092 318,881 32,150 76,926 4,191 37,415 111,483 1,000,139 1,088,749 1,088,749 11,295 1,077,455 84,118 993,337 2,867,559 3,860,895 3,860,895

459,895 350,769 35,365 87,419 4,599 42,560 111,483 1,092,091 1,297,153 1,297,153 1,297,153 117,073 1,180,080 3,860,895 5,040,976 5,040,976

504,671 385,846 38,902 99,242 5,047 48,359 111,483 1,193,550 1,534,248 1,534,248 1,534,248 154,349 1,379,899 5,040,976 6,420,874 6,420,874

553,807 424,431 42,792 110,291 5,538 53,761 111,483 1,302,103 1,728,545 1,728,545 1,728,545 193,209 1,535,336 6,420,874 7,956,211 7,956,211

169,253 169,253

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Sub Contract Workshop Facility

12.2 Statement of Cash Flow


Cash Flow Statement
Year 0 Operating activities Net profit Add: depreciation expense Deferred income tax Accounts receivable Equipment inventory Raw material inventory Pre-paid building rent Accounts payable Cash provided by operations Financing activities Change in long term debt Cash provided by / (used for) financing a Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Rs. in actuals Year 10

(4,375) (15,001) (90,000) (109,376)

169,253 111,400 (69,041) (1,134) (4,789) (9,000) 11,995 208,684

281,789 111,400 (5,079) (1,417) (6,273) (9,900) 1,949 372,469

402,050 111,400 228 (10,830) (1,767) (8,208) (10,890) 2,257 484,240

525,852 111,400 13,984 (12,254) (2,202) (10,728) (11,979) 2,616 616,688

667,479 111,400 29,720 (13,856) (2,742) (14,007) (13,177) 3,038 767,854

821,136 111,483 53,730 (15,655) (3,411) (18,271) (14,495) 3,533 938,050

993,337 111,483 84,118 (17,675) (4,239) (23,811) (15,944) 4,116 1,131,384

1,180,080 111,483 117,073 (19,943) (5,265) (31,004) (17,538) 4,806 1,339,692

1,379,899 111,483 154,349 (22,488) (5,851) (36,782) (19,292) 5,508 1,566,826

1,535,336 111,483 193,209 (23,016) 32,403 168,873 212,215 (1,384) 2,229,119

1,437,188 1,596,876

(159,596) (159,596)

(172,843) (172,843)

(187,189) (187,189)

(202,725) (202,725)

(219,551) (217,637)

(237,774) (237,774)

(257,509) (257,509)

Investing activities Capital expenditure (1,112,500) Cash (used for) / provided by investing a (1,112,500) NET CASH Cash balance brought forward Cash available for appropriation Cash carried forward 375,000

49,088 375,000 424,088 424,088

199,626 424,088 623,713 623,713

297,051 623,713 920,764 920,764

413,963 920,764 1,334,727 1,334,727

(1,914) (1,914) 548,303 1,334,727 1,883,030 1,883,030

700,276 1,883,030 2,583,306 2,583,306

873,875 2,583,306 3,457,181 3,457,181

1,339,692 3,457,181 4,796,872 4,796,872

1,566,826 4,796,872 6,363,698 6,363,698

2,229,119 6,363,698 8,592,818 8,592,818

375,000 375,000

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Pre-Feasibility Study

Sub Contract Workshop Facility

12.3 Balance Sheet


Balance Sheet
Year 0 Assets Current assets Cash & Bank Accounts receivable Equipment spare part inventory Raw material inventory Pre-paid building rent Total Current Assets Fixed assets Machinery & equipment Furniture & fixtures Office equipment Total Fixed Assets TOTAL ASSETS Liabilities & Shareholders' Equity Current liabilities Accounts payable Total Current Liabilities Other liabilities Long term debt Total Long Term Liabilities Shareholders' equity Paid-up capital Retained earnings Total Equity TOTAL CAPITAL AND LIABILITIE Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Rs. in actuals Year 10

375,000 4,375 15,001 90,000 484,376

424,088 69,041 5,509 19,790 99,000 617,428

623,713 74,121 6,926 26,063 108,900 839,722

920,764 84,950 8,693 34,271 119,790 1,168,468

1,334,727 97,204 10,895 44,999 131,769 1,619,594

1,883,030 111,060 13,637 59,006 144,946 2,211,679

2,583,306 126,715 17,048 77,277 159,440 2,963,786

3,457,181 144,390 21,288 101,087 175,385 3,899,330

4,796,872 164,333 26,552 132,091 192,923 5,312,772

6,363,698 186,821 32,403 168,873 212,215 6,964,011

8,592,818 209,837 8,802,654

1,035,000 76,000 1,500 1,112,500 1,596,876

931,500 68,400 1,200 1,001,100 1,618,528

828,000 60,800 900 889,700 1,729,422

724,500 53,200 600 778,300 1,946,768

621,000 45,600 300 666,900 2,286,494

517,500 38,000 1,914 557,414 2,769,093

414,000 30,400 1,532 445,932 3,409,718

310,500 22,800 1,149 334,449 4,233,779

207,000 15,200 766 222,966 5,535,738

103,500 7,600 383 111,483 7,075,494

8,802,654

11,995 11,995

13,944 13,944

16,200 16,200

18,817 18,817

21,854 21,854

25,387 25,387

29,503 29,503

34,308 34,308

39,816 39,816

38,432 38,432

1,437,188 1,437,188

1,277,592 1,277,592

1,104,749 1,104,749

917,560 917,788

714,835 729,046

495,283 539,215

257,509 355,170

181,779

298,852

453,201

646,410

159,688 159,688 1,596,876

159,688 169,253 328,940 1,618,528

159,688 451,042 610,729 1,729,422

159,688 853,092 1,012,779 1,946,768

159,688 1,378,944 1,538,631 2,286,494

161,602 2,046,422 2,208,024 2,769,093

161,602 2,867,559 3,029,161 3,409,718

161,602 3,860,895 4,022,497 4,233,779

161,602 5,040,976 5,202,578 5,535,738

161,602 6,420,874 6,582,476 7,075,494

161,602 7,956,211 8,117,813 8,802,654

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Sub Contract Workshop Facility

13 USEFUL PROJECT MANAGEMENT TIPS Technology Required spare parts & consumables: The quality of cutting and grinding tools should be ensured. The tools must be regularly checked for dimensional accuracy and physical condition. The preventive maintenance of all the machinery especially the lathe, shaper and centre grinding machines should be done regularly. Energy Requirement: The use of generator is not recommended due to high operating costs. Machinery Suppliers: As per prevalent practices in industry the used machines have been recommended. In selecting the machinery multiple sources must be contacted and thorough inspections be carried out before purchasing the machinery. Quality Assurance Equipment & Standards: While booking job work orders from customers, all the production and inspection drawings must be obtained. Any confusion on the production or quality assurance parameters must be cleared beforehand. Utmost care should be exercised during machining and inspection processes as these items will form part of some other product. Strict quality control procedure will improve the credibility of the workshop.

Marketing Sales & Distribution Network: Owners links within the industry and his technical expertise are key to the continuous flow of job work orders for the workshop.

Human Resources Adequacy & Competencies: Skilled and experienced staff is necessary for the workshop. Only staff having shop floor experience should be considered.

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Sub Contract Workshop Facility

14 USEFUL LINKS Prime Ministers Office, www.pmo.gov.pk Small and Medium Enterprise Development Authority, www.smeda.org.pk National Bank of Pakistan (NBP), www.nbp.com.pk First Women Bank Limited (FWBL), www.fwbl.com.pk Government of Pakistan, www.pakistan.gov.pk Ministry of Industries & Production, www.moip.gov.pk Ministry of Education, Training & Standards in Higher Education, http://moptt.gov.pk Government of Punjab, www.punjab.gov.pk Government of Sindh, www.sindh.gov.pk Government of Khyber Pakhtunkhwa, www.khyberpakhtunkhwa.gov.pk Government of Balochistan, www.balochistan.gov.pk Government of Gilgit Baltistan, www.gilgitbaltistan.gov.pk Government of Azad Jamu Kashmir, www.ajk.gov.pk Trade Development Authority of Pakistan (TDAP), www.tdap.gov.pk Security Commission of Pakistan (SECP), www.secp.gov.pk Federation of Pakistan Chambers of Commerce and Industry (FPCCI) www.fpcci.com.pk State Bank of Pakistan (SBP), www.sbp.org.pk National Bank of Pakistan (NBP), www.nbp.com.pk Gujranwala Tools Dies and Molds Center (GTDMC) www.gtdmc.org.pk Pakistan Industrial and Technical Assistance (PITAC) www.pitac.gov.pk

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Pre-Feasibility Study

Sub Contract Workshop Facility

15 OPERATING AND FINANCIAL ASSUMPTIONS


Table 10: Operational Assumptions

Maximum number of job orders (Annually) Number of job orders Year 1 Hours operational per day Days operational per year
Table 11: Economy-Related Assumptions

30,000 21,000 8 300 10% 10% 15 10 15 30 Rs/Job 10 6.80 10% 8 10% 1% 0.1% 0.5% 10 90% 10% 8% 7 12

Electricity price growth rate Wage growth rate


Table 12: Cash Flow Assumptions

Accounts Receivable cycle (in days) Accounts payable cycle (in days) Raw material inventory (in days) Equipment spare part inventory (in days)
Table 13: Expense Assumptions

Cost of raw material Tooling Miscellaneous (jigs, fixtures, etc) Raw material cost growth rate Electricity utilization in hours/day Machinery maintenance (% of machinery cost) Promotional expense (% of revenue) Administration expense (% of revenue) Communication expense ( % of revenue)
Table 14 Financial Assumptions

Project life (Years) Debt Equity Interest rate on long-term debt Debt tenure (Years) Debt payments per year

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Table 15: Depreciation Rate Assumptions

Machinery and Equipment Office Equipment Furniture & Fixtures

10% 10% 10%

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